Blockchain Blind Spots

In modeling systems dynamics, Self-Reinforcing Feedback, also known as a Positive Feedback Loop, happens when the output of a process amplifies the input to that process in continuing cycles of that process.

That may have made it sound complicated, but it’s fairly simple. In a large group of cattle, if something startles a few of them, and they react suddenly startling others, then this pattern repeats, then you get a stampede.

Proof-of-Work or Proof-of-Stake both Centralize Power and Wealth

In Proof-of-Work, if you have more money to buy more computing power, then you can perform more hashes so that you earn more money than others, which lets you invest in more computing power, and so on.

In Proof-of-Stake, if you have more money to put at stake for your computed answers, you win more of the stakes, which lets you invest more stake, to win more stakes, and so on.

Make no mistake about it, in both cases, the rich get richer. Those with the power amplify their power.

Proof-of-Stake may solve the problem of wasting .3% of the planet’s electricity churning hashes, but it is exactly the same kind of positive feedback loop as Proof-of-Work.

If someone tells you they’re building a “decentralized” system, and it runs a consensus algorithm configured to give the people with wealth or power more wealth and power, you may as well call bullshit and walk away.

That is what nobody seems willing to see about blockchain.

In less than 10 years, bitcoin issuance and holdings became more centralized than dollars. Blockchain is just a turbo-charged replay of the same destructive, reductive, and speculative patterns of national currencies. We get to the same imbalances faster.

Positive feedback loops do happen in nature, but they typically have boundary conditions which act as a guardrail — a way to break the cycle so that it doesn’t spiral into dangerous imbalance. But what is the limit to people’s greed? Do you see any realistic way to break this cycle other than collapse of the currency itself?

A viable alternative: This is why we’ve built Holochain — a scalable and healthy alternative to blockchain based on nature’s design patterns for operating on large scales.